Posts Tagged ‘OBR budgetary responsiblity committee’

The 3 members of the OBR budgetary responsibility committee, by their incompetence, have bequeathed the nation a windfall. The question surely, in which case, is how should we spend it? Restore EMA? Or the future jobs fund? Yesterday they told us we couldn’t afford to. Well today we can.

The ONS published today the level of public borrowing for the current tax year 2010/11. The OBR’s prediction was that by January, the government should be borrowing £4bn less than they did last year. Today, the figures have come out as £14bn. In fact, January was the first month since June 2008 when the government didn’t borrow.

The source of this error is the underestimation of the rise in tax receipts from the recovering economy. This is rising at 8.4% versus the OBR’s prediction of 6.7%. Now, what’s 1.7% amongst economists? After all, Mervyn King is running inflation 3% above his mandated rate.

However, this 1.7% is at £10bn. And that is quite a lot of money. As everyone knows, we’re facing an epidemic of youth unemployment, and restarting the future job’s fund would only cost £1bn. Re-instating educational maintenance allowance would be £1bn. And £7bn is what the government is cutting out of the welfare budget.

In fact, these errors, small as they are in economics terms, are having enormous effects on our economy and our future.

Never mind that there wasn’t a single economist that predicted the global economic crash. Forget that this is the worst global financial crisis since the 1930s, put together with the largest globally co-ordinated government fiscal and monetary intervention. How making any predictions of how the economy would perform in this backdrop wasn’t going to end up like putting be the tail on the donkey speaks volumes of the hubris of the economics profession.

The OBR’s task was always going to be difficult, but its way-off prediction of fiscal disaster has allowed this government to imperil the economic success of our future generation.